Oil deal with Exxon…Guyana to get two percent royalty; 50 percent of profits

Source: http://www.kaieteurnewsonline.com

It is now final. Guyana is to receive a two-percent royalty on gross earnings and 50 percent of the “profits” of the oil proceeds when production starts in 2020.

Making true to its promise on Wednesday to pronounce on the pending production licence to be issued to Esso Exploration and Production (Guyana) Limited and partners Hess and Nexen, Government last evening said it is expected to grant the licence shortly.

Extraction from the offshore Liza field is expected to commence in 2020 at an initial rate of 100,000 barrels of crude per day in the first phase, with a Floating Production Storage and Offloading (FPSO) vessel providing the main infrastructural support for the project, a statement from the Ministry of Natural Resources said last evening.

With regards to the big ticket issue of what exactly Guyana is getting, this is what the statement said.

“The Government and people of the Cooperative Republic of Guyana will receive a royalty of two percent on gross earnings and benefit from 50 percent of the profits from the sale of petroleum once production commences.”

The statement did not immediately make it clear if it is 50 percent of the gross profit or 50 percent of the net profit.

In the last two years since the discovery was announced, close attention has been paid to what exactly the administration would manage to arrive at.

There was a standing agreement from 1999, with government saying it was not happy with a one percent royalty that was offered.

With regards to the production licence, according to the ministry yesterday, following reviews of the technical and environmental aspects of the Liza Project – Development Plan that was submitted by Esso Exploration and Production (Guyana) Ltd (EEPGL) in December, 2016, the Government of the Co-operative Republic of Guyana is expected to grant a production licence to ExxonMobil for production of petroleum to move ahead in 2020.

Esso is the local subsidiary of ExxonMobil, a Texas, US-based company that is one of the biggest explorers in the world.

The ministry said that the licence placed emphasis on Guyanese employment and training, the procurement of goods and services in Guyana, infrastructural soundness and the protection of the environment.

“The Production Licence is required to be finalized before the developers make their Final Investment Decision (FID) for the project in June 2017.”

The Ministry said that with its other agencies, it is actively pursuing a number of undertakings on the policy, legislative and infrastructure sides to ensure that the country is prepared for the coming oil production.

“As this Ministry, along with others, seeks to develop our oil and gas industry in a sustainable and profitable manner, citizens are encouraged to continue to provide their feedback and recommendations on the new sector when the Ministry’s outreaches visit their communities. Following consideration by the Cabinet the findings of the various reports will be released.”

The offshore discovery has around two billion barrels of high quality oil and was described as an exciting find in this part of the hemisphere.